Why A Drop In Inflation Does Not Necessarily Mean A Drop In Prices Of Commodities

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The National Bureau of Statistics (NBS) last week reported inflation rate has dropped to 8.5%. A lot of people took the news with a pinch of salt pointing to the ever increasing prices of commodities. I’ve also read a few commentaries where analyst complain about the seemingly contradictory nature of a drop in inflation and a rise in prices of commodities. People just don’t understand why the Bureau of Statistics will tell us inflation has reduced yet prices of commodity never drop. It’s a quandary for some. However, the DG of the Statistics Bureau has basically explained the difference between inflation and a rise in prices of commodities. See excerpts of his explanation;

“Inflation is not a reduction in prices; inflation is a rise in prices. When you say it has gone down, it means the rise this time is not as much as the previous time.

“Inflation is the slowdown in the rise of price; it is not a reduction in price as most people think. Price rise is actually a good thing but you have to ensure that the extent of that price rise is reasonable and going at a sustainable pace,” he explained.

Furthermore, the NBS boss said: “If your price is N100 and it goes to N200 last month and this month it goes to N250, this difference is N50 compared to N100 but it has still risen. All it is showing is that the rise is slower than previously.

I guess this is puts the matter to bed once and for all.

 

NBS Explains Discrepancy between High Commodity Prices, Low Inflation

 

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